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REG - Property FranchiseGp - Interim Results

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RNS Number : 1875Z  Property Franchise Group PLC (The)  13 September 2022

13 September 2022

THE PROPERTY FRANCHISE GROUP PLC

(the "Company" or the "Group")

 

Interim Results for the six months ended 30 June 2022

Full Year results anticipated to be in-line with market expectations

 

The Property Franchise Group PLC, the UK's largest property franchisor, is
pleased to announce its interim results for the period ended 30 June 2022.

 

Financial Highlights

 

·    Group revenue increased 18% to £13.1m (H1 2021: £11.1m)*

·    Management Service Fees ("royalties") increased 5% to £7.5m (H1
2021: £7.1m)

·    Adjusted operating margin** 41% (H1 2021: 47%)

·    Adjusted EBITDA*** increased 8% to £5.7m (H1 2021: £5.3m)

·    Profit before tax increased 9% to £3.8m (H1 2021: £3.5m)

·    Adjusted basic earnings per share of 14.1p (H1 2021: 15.3p).  The 8%
decrease reflects the 10% increase to the shares in issue as a result of the
Hunters acquisition.

·    Highly cash generative with net debt of £2.6m at 30 June 2022 (30
June 2021: £5.4m).

·    Increased interim dividend by 11% to 4.2p (H1 2021: 3.8p)

 

* Hunters acquired 19 March 2021 and Mortgage Genie acquired 6 September 2021.
Full 6 months trading for both in H1 2022.

**before share-based payments charge, exceptional items and amortisation
arising on consolidation

*** before share-based payments charge and exceptional items

 

Operational Highlights

 

·    Sales agreed pipeline increased 15% to £33.8m (H1 2021: £29.5m)

·    Managing 74,000 rental properties (H1 2021: 73,000)

·    8 acquisitions at the franchisee level (H1 2021: 5), added 1,001
managed properties (H1 2021: 647) contributing £1.0m (H1 2021 £0.5m) of
managed income per annum to franchisee turnover

·    EweMove sold 19 new territories (H1 2021: 37), now totalling 178
territories

·    Hunters sold 5 personal agent territories (H1 2021: nil)

 

 

 

Gareth Samples, Chief Executive Officer of The Property Franchise Group, said:

"Reflecting on the first half of the year and the challenges businesses and
consumers have faced, I am particularly delighted to report robust results for
the Group's half year period. We have traded in line with the Board's
expectations, against a comparative period in which we benefitted from the
buoyant sales market.

"While factors such as the cost-of-living crisis and inflation are driving a
challenging macro-environment, we are secure in the quality of our business
and our ability to successfully navigate a more difficult backdrop. We have an
excellent team in place, a very experienced group of franchisees and a proven
strategy, which we expect to continue delivering growth.

 

"We are extremely well-placed in the current environment and have a
substantial growth opportunity to capitalise on.  Post period end activity
indicates the second half will perform at least as strongly as the first and
ahead of H2 2021. As a result, the Board expects the full year results to be
in-line with market expectations and this confidence is reflected in the
interim dividend for 2022, which I am pleased to report is up 11% on 2021."

 

Investor presentation

The Company is hosting a live private investor presentation on Tuesday 13
September 2022 at 13.00. All existing and potential private investors
interested in attending are asked to register using the following link:
https://bit.ly/TPFG_interim_results (https://bit.ly/TPFG_interim_results)

 

For further information, please contact:

 The Property Franchise Group PLC                            01202 405549

 Gareth Samples, Chief Executive Officer

 David Raggett, Chief Financial Officer

 Canaccord Genuity Limited (Nominated Adviser and Broker)   0207 523 8000

 Max Hartley

 Tom Diehl

 Alma PR                                                   020 3405 0205

 Justine James                                             propertyfranchise@almapr.co.uk

 Joe Pederzolli

 

About The Property Franchise Group PLC:

The Property Franchise Group PLC (AIM: TPFG) is the largest property
franchisor in the UK and manages the second largest estate agency network and
portfolio of lettings properties in the UK.

The Company was founded in 1986 and has since grown to a diverse portfolio of
nine brands operating throughout the UK, comprising longstanding high-street
focused brands and a hybrid, no sale no fee agency.

The Property Franchise Group's brands are Martin & Co, EweMove, Hunters,
CJ Hole, Ellis & Co, Parkers, Whitegates, Mullucks & Country
Properties.

Headquartered in Bournemouth, UK, the Company was listed on AIM on the London
Stock Exchange in 2013. More information is available
at    www.propertyfranchise.co.uk (http://www.propertyfranchise.co.uk/)

 

 

 

Chief Executive Officer's Statement

I am delighted to be reporting on a period of solid progress for the Group, in
which we have seen continued growth in many key metrics, including revenue,
Management Service Fees and profit. The improved performance against H1 2021
is made all the more pleasing given that 2021 was an exceptionally strong year
for the residential housing market, especially in the first half year, and
demonstrates the many advantages of a focused franchise model with a multitude
of income streams. To have performed in line with our expectations during such
uncertain times is indicative of the resilience of our offering.

I would like to use this opportunity to thank the entire central team and our
franchisees, who have once more shown what can be achieved with hard work,
ingenuity and teamwork, driving the success of the Group and Network.

The six months ended 30 June 2022 represented a period of continued execution
against our stated strategic initiatives, with the growth in revenue driven by
the acquisitions of Hunters and Mortgage Genie in 2021.  The increased
lettings revenue and developing financial services revenue from our
long-standing businesses offset the impact on them of the market-led reduction
in sales transactions. Our hybrid offerings also continued to perform in-line
with expectations.

Whilst the macro-economic environment has unquestionably become more
challenging, our Group has continued to benefit from a resilient lettings'
income stream and growth from strategic acquisitions, as well as our highly
capable and experienced senior management team. By leveraging our position, we
believe further growth opportunities exist which we will be able to capitalise
on over the next twelve months.

Operational review

Group revenue increased 18% to £13.1m (H1 2021: £11.1m) and the key element
of that, Management Service Fees ("MSF"), increased 5% to £7.5m (H1 2021:
£7.1m). The mix of MSF was 56% lettings and 44% sales.  On a like for like
basis, Group revenue reduced by 9%, lettings MSF increased by 7% and sales MSF
reduced by 21%.

Seasonally adjusted UK Property Transactions at 621,000 for H1 2022 were 28%
lower than the same period in 2021, reflecting the softening of the market
when compared to the exceptional prior period. However, we continue to see a
very healthy sales agreed pipeline for the Group, an increase of 15% against
an exceptional 2021. We have during the period been faced with lengthening
sales' completion times which have impacted both our franchisees' sales
revenues and our owned offices' revenues. This has started to improve post
period end.

We are seeing additional opportunities within the current market for lettings
portfolio acquisitions. As such we are aiming to capitalise on this and
bolster our number of managed properties by the end of the year, with 1,001
properties having already been acquired in H1 contributing £1.0m to
franchisees' managed income per annum. Across our managed properties, we have
seen rent increases of 10% to 15%, in line with the increases reported by
Rightmove and Homelet for June 2022

Our two hybrid offerings, EweMove and Hunters Personal, both continue to
perform well, selling 19 and 5 new territories in H1 respectively. This
represents a very strong performance against the macro environment, and we
look forward to building on the hybrid opportunity even further moving
forwards.
 

Strategic progress

Over the period there has been clear progress made against our six core areas
of strategic focus, as outlined below:

 

Lettings growth

 

Like-for-like lettings MSF was up 7% in H1. The increase in lettings MSF
reflects the increase in rents across circa 40% of the 74,000 managed
properties on the market, alongside continued demand for rental properties.

 

We are also seeing significant opportunities within the lettings market for
portfolio acquisitions. Our franchisees completed on 8 transactions in H1,
adding £1.0m of managed income on an annualised basis. There have been a
further 4 transactions completed since the period end and, we expect to
achieve more than 1,000 managed properties added in H2. We are aiming for at
least 3,000 managed properties to be acquired in 2023.

 

Develop sales activity in the high street-led brands

 

Sales revenues via our high street-led brands have performed slightly better
than our expectations of a 25% reduction but that reduction would have been
lower still if sales completion times had not steadily increased in H1 2022.
The sales are still there in the pipelines. Indeed, looking at the performance
of our brands including Hunters for a full H1 2021*, sales agreed were only
down 12% on the corresponding very buoyant period and listings were virtually
unchanged at 17,071 (H1 2021: 17,081). Our increased support for our
high-street led brands appears to be making their sales functions stronger.

 

Financial services growth

 

Mortgage Genie is performing strongly with turnover of £0.8m in H1 and
profits of £0.1m. We are recruiting to expand its capabilities. We also
continue to see progress in the partnering of our franchisees with
representatives of the PRIMIS network and the number of franchisees running
their own financial services businesses is also increasing.

 

EweMove recruitment

 

EweMove recruited 19 new territories in the period, increasing current
operations to 178 territories. We had a target to double the network to 230
territories by the end of 2022 but the uncertainty in the economy is having an
impact on recruitment and we expect to achieve close to 200 territories under
contract by the end of 2022 with further expansion expected thereafter.

 

Acquisitions at franchisor level

 

Our acquired businesses are almost fully integrated into the Group and
continue to perform well.

 

Digital marketing

 

We operate best-in-class digital marketing, providing local solutions for
franchisees and a Group-wide customer journey management. New campaigns are
driving pleasing levels of results for the network. The IT focus during the
year gives us the ability to drive our brands through digital marketing.

 

Current Trading and Outlook

 

We have been encouraged by the levels of trading in July and August helped by
an improvement in sales completion times and the number of potential
acquisition opportunities for our franchisees.

 

We are delighted with the synergies we have achieved with the Hunters
acquisition and by the year end we expect to have achieved all those set out
in our original plan.

The Group has traded in line with expectations to the half-year, ahead of the
comparative period which was propelled by the buoyant sales market and, whilst
H2 2021 was less buoyant, the signs so far are that this second half year will
perform better. For these reasons, the Board remains confident of achieving
market expectations for the full year results and further reflected that
confidence in its interim dividend for 2022, up 11% on 2021.

 

While factors such as the cost-of-living crisis and inflation are driving a
challenging macro-environment, we are secure in the quality of our business
and our ability to successfully navigate a more difficult backdrop. We have an
excellent team in place, a strong and, for the main, very experienced group of
franchisees and a proven strategy, which we expect to continue delivering
growth over many years to come. In addition, we remain highly cash generative
which should see us move into a net cash position before the year end and
remain committed to our progressive and resilient dividend policy. All in all,
we are extremely well-placed in the current environment and have a substantial
growth opportunity to capitalise on.

 

Gareth Samples, Chief Executive Officer

 

 

Financial Review for 2022 Interim Results

Revenue

Revenue for the six months ended 30 June 2022 increased 18% to £13.1m (H1
2021: £11.1m). The increase is due to owning Hunters and Mortgage Genie
throughout the period; contributing an additional £1.4m and £0.8m
respectively whilst franchise sales reduced by £0.2m. Like for like revenue
reduced by 9%, impacted by the 28% reduction in completions in the sales
market.

Excluding Hunters and Mortgage Genie, revenue was almost unchanged on H1 2021
at £7.2m which is significant given that we had two outstanding sales months
in March 2021 and June 2021 driven by the stamp duty holiday and by a
reduction in the rate of sales completions in H1 2022.

Management Service Fees ("MSF")

MSF from our franchised network increased by 5% to £7.5m (H1 2021: £7.1m).
The increase of £0.4m resulted from an increase in Hunters of £0.5m (+38%)
resulting from a full 6 months of contribution in H1 2022, an increase of
£0.1m (+3%) from EweMove and a reduction in the other high-street brands of
£0.2m (-6%).

 

 H1 2022       Total Growth  Like for Like Growth  Total Result  Like for Like Result  Total Mix  Like for Like Mix  Prior Period
 Lettings MSF  14%           7%                    £4.2m         £3.9m                 56%        59%                £3.6m
 Sales MSF     -5%           -21%                  £3.3m         £2.8m                 44%        41%                £3.5m

 

Total Lettings MSF growth of 14% was underpinned by like for like growth of 7%
with higher rents being agreed on new lets (despite a lower number of lets).
The mix of lettings MSF improved due to longer sales completion rates and the
slowing sales market.

With two significant Sales MSF months in H1 2021 due to the stamp duty
holiday, our forecast of a 25% reduction in sales transactions in 2022 and the
increase in the time taken to complete sales so far in 2022, a reduction in
Sales MSF was inevitable in H1 2022. As a result, there was a like for like
reduction of 21%, albeit with the full six months contribution from Hunters in
2022, the total reduction in Sales MSF was only 5%.

We finished the period with a sales' agreed pipeline of £33.8m, as high as at
any time during 2021. There were also the first glimpses of a reduction in the
time taken to complete sales transactions which should bode well for Sales MSF
in H2 2022 if this trend continues.

Our hybrid brand EweMove, which charges a monthly licence fee per territory
occupied and a fee per completed transaction, generated a 3% increase in MSF
to £1.6m (H1 2021: £1.5m).

Owned Offices

Hunters operates 10 owned offices. All 10 offering letting agency services and
8 offering sales agency services. These offices contributed £2.5m to revenue
in H1 2022 whereas in the 15 weeks post acquisition to June 21 they
contributed £2.0m. On a like for like basis comparing the revenue generated
from 19 March 2022 to 30 June 2022 with the corresponding period, Hunters
owned offices generated £1.4m of revenue compared to the £2.0m in the
corresponding period, a reduction of 30%. This reduction is slightly more than
our own forecasts reflecting lower sales than expected in our Midlands
offices.

Franchise Sales

Franchise sales income was £0.1m (H1 2021: £0.3m) mainly generated through
the sale of 19 territories (H1 2021: 37) in EweMove.

There were 3 (H1 2021: 8) resales of high-street led franchises in the period
and 3 (H1 2021: 5) new franchise sales in the high-street led brands. The
latter keeping up a trend that started last year of new found interest by
existing franchisees to invest in further territories.

Other

Other income increased by 67% to £2.9m (H1 2021: £1.7m). This category
consists of services provided to franchisees generating £2.0m (H1 2021:
£1.7m) where the growth results from a full six months contribution by
Hunters in H1 2022 and income from financial services generating £0.9m (H1
2021: nil) primarily derived from the acquisition of Mortgage Genie in
September 2021.

Cost of Sales

Cost of sales increased by 86% to £2.8m (H1 2021: £1.5m). The significant
changes since H1 2020 when cost of sales was £0.4m result from the
acquisitions of Hunters and Mortgage Genie where the direct costs relating to
the provision of services to their customers are cost of sales.

Of the £1.3m increase, a full six months of operating the owned offices in
Hunters cost an additional £0.8m which was at a similar run rate per month to
the prior period and Mortgage Genie, not acquired until September 2021,
incurred cost of sales of £0.5m.

Administrative expenses

Administrative expenses are unchanged at £5.7m (H1 2021: £5.7m).

The prior year includes significant exceptional costs of £0.9m, not detailed
on the face of the P&L as is the current practice, relating to the
acquisition of Hunters. So there has been an increase in the administrative
expenses over H1 2021. Moreover, these exceptional costs reduce the
comparative numbers in H1 2021 for EBITDA, operating profit, operating margin,
profit before tax and earnings. To aide with the comparisons, these key
indicators of financial performance have been adjusted for the exceptional
costs, as well as the amortisation arising on consolidation and share-based
payment charges and are provided below.

The increase in administrative expenses after excluding the exceptional costs
from H1 2021 is explained by a full six months of amortisation for Hunters
(£0.3m) and operation of Hunters (£0.2m), Mortgage Genie (£0.3m) and the
costs of a larger franchise network in EweMove (£0.1m). Notably an additional
11 weeks of operational costs in Hunters in this half year has only resulted
in an increase in costs of £0.2m (10%) over the comparative period.

The comparative has been restated to take account of a charge of £0.3m
relating to the purchase of shares from employees by the TPFG Employee Benefit
Trust which has been moved to Own share reserve. It reflects the treatment in
the audited financial statements for the year ended 31 December 2021.

EBITDA

The Group's EBITDA increased 22% to £5.1m (H1 2021: £4.2m). Adjusting for
the share-based payment charges and exceptional costs in the prior period,
adjusted EBITDA increased 8% to £5.7m (H1 2021: £5.3m).

Operating profit

Operating profit increased 11% to £4.0m (H1 2021: £3.6m) and operating
margin was 31% (H1 2021: 32%). Adding back the share-based payments charges,
amortisation arising on consolidation and the exceptional costs in the prior
period, adjusted operating profit increased 3% to £5.4m (H1 2021: £5.2m).
Adjusted operating margin was 41% (H1 2021: 47%) indicating the margin being
derived from the underlying activities.

 

Profit before income tax

Profit before taxation increased 9% to £3.8m (H1 2021: £3.5m). Adding back
the share-based payments charges, amortisation arising on consolidation and
the exceptional costs in the prior period, adjusted profit before tax was
£5.2m (H1 2021: £5.1m).

Taxation

The effective rate of corporation tax for the period was 20.9% (H1 2021:
23.3%). The Budget announced in March 2021 signalled an increase in the
corporation tax rate to 25% from April 2023 onwards. This rate was
substantially enacted in May 2021. However, as it was announced two weeks
prior to the acquisition of Hunters, a restatement of £1.5m to our prior year
tax charge has been required, taking it from £0.8m to £2.3m. It reflects the
treatment in the audited financial statements for the year ended 31 December
2021.

Profit after taxation

Profit after taxation for the period increased by 172% to £3.2m (H1 2021:
£1.2m). This is after restating for the £1.5m of deferred tax charge
highlighted in the taxation section above.

Earnings per share

Basic earnings per share increased 200% to 9.9p (H1 2021: 3.3p) based on a
weighted average number of shares in issue in the period of 32,041,966 (H1
2021: 29,178,704). This is after restating for the £1.5m of deferred tax
charge highlighted in the taxation section above.

Adjusted basic earnings per share decreased 8% to 14.1p (H1 2021: 15.3p) based
on a weighted average number of shares in issue in the period of 32,041,966
(H1 2021: 29,178,704).

Both measures in H1 2022 reflect the full dilution brought about by the
acquisition of Hunters in March 2021 with the average weighted number of
shares in issue increasing by 10% over H1 2021.

See note 8 to the interim statements for the detailed EPS calculations.

Dividends

The Board has pursued a progressive dividend policy since the IPO. The Group
has again made progress this year with its strategic objectives. Its profit
performance has kept pace with the prior buoyant period as demonstrated by the
adjusted profit before tax.

The Board expects the full year profit to be in-line with market expectations
despite the significant uncertainty that exists in the economy. As a result,
the Board is pleased to announce an 11% increase in the interim dividend to
4.2p (H1 2021: 3.8p). It will be paid on 7 October 2022 to all shareholders on
the register on 23 September 2022. Our shares will be marked ex-dividend on 22
September 2022. The total amount payable is £1,346k.

Summary of Key Financials

 

                                        H1 2022  H1 2021  Growth
 Revenue                                £13.1m   £11.1m   18%
 MSF                                    £7.5m    £7.1m    5%
 Cost of sales                          £2.8m    £1.5m    86%
 Admin expenses                         £5.7m    £5.7m    -
 EBITDA                                 £5.1m    £4.2m    22%
 Adjusted EBITDA                        £5.7m    £5.3m    8%
 Operating profit                       £4.0m    £3.6m    11%
 Adjusted operating profit              £5.4m    £5.2m    3%
 Profit before tax                      £3.8m    £3.5m    9%
 Adjusted profit before tax             £5.2m    £5.1m    1%
 Earnings per share (basic)             9.9p     3.3p     200%
 Adjusted earnings per share (basic)    14.1p    15.3p    -8%
 Adjusted earnings per share (diluted)  14.1p    15.1p    -7%
 Dividend                               4.2p     3.8p     11%
 Net cash generated from operations     £3.3m    £4.4m    -25%

 

EweMove

We often get asked about the financial performance of EweMove, our hybrid
brand, which has steadily improved its financial performance over the last few
years. It is expected to achieve a similar full year result to last year due
to investing in additional support for its new entrants and replacing its
operating software alongside the challenging economic environment.

                    H1 2022  H1 2021  Growth
 Revenue            £2.0m    £2.0m    -
 Costs              £1.3m    £1.2m    8%
 Profit before tax  £0.7m    £0.8m    -13%
 Profit margin      34%      40%

 

Cash flow

At an operational level, the Group remains as highly cash generative as in
past years although not immediately obvious in the numbers for H1 2022 due to
the increase in trade debtors. These are debts with partners which are due for
payment in H2. As a result, net cash generated from operations decreased by
25% to £3.3m (H1 2021: £4.4m). That represents 83% conversion of operating
profit into net cash generated from operations (H1 2021: 123%).

EweMove is just about to go live with a new operating system for its
franchisees. The costs of acquiring rights to use and modify existing
third-party software are the majority of the £356k shown against purchase of
intangible assets.

On 27 May 2022, the Group paid a final dividend of 7.8p for 2021 which
amounted to £2.5m.

The Group agreed a bank facility with Barclays Bank Plc on 27 January 2021
consisting of a revolving credit line of £5.0m and a term loan of £7.5m. It
then drew the £12.5m to fund the acquisition of Hunters in March 2021. The
repayments were £0.9m (H1 2021: nil) and the total value of the loans
outstanding at the end of the period were £10.1m (H1 2021: £12.5m)

During the period bank loan interest of £0.2m (H1 2021: £0.1m) was paid. The
interest rates are similar for each loan at 2.2% and 2.4% respectively plus,
in each case, the Bank of England's Bank Rate.

Overall, the cash balances of the Group increased by £0.5m (7%) to £7.6m (H1
2021: £7.1m).

 

Liquidity

The Group had a net debt balance of £2.6m at the end of the period (H1 2021:
£5.4m).

Financial position

The Group has a consistent history of strong and improving cash generating
capabilities. Reduction in net debt so far this year has been slower due to
the increase in working capital mainly because of the debts already mentioned
above and the decision to purchase new operating software for EweMove. The
Group continues to operate within its covenants.

The Group has enhanced its cash generating capabilities over the last 18
months. It has also improved its balance sheet strength with equity
attributable to the owners increasing 11% to £34.7m in the period.

The Board intends to pursue its progressive dividend policy to generate an
attractive return for shareholders. At the same time, with the Group's
continually improving balance sheet strength, the Board will continue to
pursue corporate acquisitions as and when they arise and to fulfil the other
elements of its strategic plan.

 

David Raggett, Chief Financial Officer

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
            FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

                                                                                                                                        Unaudited                Restated*                         Audited

                                                                                                                                                                 Unaudited
                                                                                                                                        6 Months Ended           6 Months Ended                    12 Months Ended
                                                                                                                                        30.06.22                                   30.06.21                            31.
                                                                                                                                                                                                                       12.
                                                                                                                                                                                                                       21
                                                                     Notes                                                              £'000                    £'000                        £'000
 CONTINUING OPERATIONS
 Revenue                                                             5                                                                  13,089                   11,122                       24,042
 Cost of sales                                                                                                                          (2,770)                  (1,487)                      (3,697)
 GROSS PROFIT                                                                                                                           10,319                   9,635                        20,345

 Administrative expenses                                                                                                                (5,679)                  (5,739)                      (12,719)
 Share-based payments charge                                                                                                            (644)                    (301)                        (970)
 OPERATING PROFIT                                                                                                                       3,996                    3,595                        6,656

 Finance income                                                                                                                         15                       2                            4
 Finance costs                                                                                                                          (220)                    (118)                        (320)
 Other gains and losses                                                                                                                 -                        -                            83
 PROFIT BEFORE INCOME TAX EXPENSE                                                                                                       3,791                    3,479                        6,423

 Income tax expense                                                  6                                                                  (608)                    (2,309)                      (2,745)
 PROFIT FROM CONTINUING OPERATIONS                                                                                                      3,183                    1,170                        3,678
                                                                                                     7                                  -                        (185)                        (169)

 (Loss) / profit on discontinued operation, net of tax
 PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD                                                                                   3,183                    985                          3,509

 PROFIT AND TOTAL COMPREHENSIVE

 INCOME FOR THE PERIOD ATTRIBUTABLE TO:

 Owners of the parent                                                                                                                   3,169                    954                               3,469
 Non-controlling minority interest                                                                                                      14                       31                                40
                                                                                                                                        3,183                    985                               3,509
 Earnings per share                                                              8                                                      9.9p                     3.3p                              11.3p

 attributable to owners of the parent

 Diluted earnings per share attributable to owners of the parent     8                                                                  9.9p                     3.3p                              11.3p

 Adjusted results (note 8)

 Adjusted profit for the period                                                            4,534                            4,424                                             8,256
  Earnings per share attributable to owners of parent                  14.1p                                                       15.3p                                                                 27.0p
  Diluted Earnings per share attributable to owners of parent                                     14.1p                                    15.1p                                                         26.9p

 

 * See note 3 for details regarding the restatement as a result of reflecting
 the accounting treatment used in the audited financial statements for the year
 ended 31 December 2021.

 

 

* See note 3 for details regarding the restatement as a result of reflecting
the accounting treatment used in the audited financial statements for the year
ended 31 December 2021.

 

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

AS AT 30 JUNE 2022

                                                                                                            Unaudited                  Restated*                  Audited

                                                                                                                                       Unaudited
                                                                                                             As at 30.06.22            As at 30.06.21             As at 31.12.21
                                                                                                            £'000                      £'000                      £'000
 ASSETS
 NON-CURRENT ASSETS
 Intangible assets                                                                                                          46,100           46,320                     46,498
 Property, plant and equipment                                                                                              224              254                        217
 Investment property                                                                                                        233              281                        256
 Investments                                                                                                                169              86                         169
 Right of use assets                                                                                                        1,358            1,555                      1,568
 Prepaid assisted acquisitions support                                                                                      391              517                        424
                                                                                                                            48,475           49,013                     49,132

 CURRENT ASSETS
 Trade and other receivables                                                                                                3,892            3,513                      2,820
 Cash and cash equivalents                                                                                                  7,578            7,107                      8,413
                                                                                                                            11,470           10,620                     11,233
 Assets in a disposal group classified as held for sale                                                                     -                212                        -
                                                                                                                            11,470           10,832                     11,233
 TOTAL ASSETS                                                                                                               59,945           59,845                     60,365

 ISSUED CAPITAL AND RESERVES

 ATTRIBUTABLE TO OWNERS OF PARENT

 Share capital                                                                                                              320              320                        320
 Share premium                                                                                                              4,129            4,129                      4,129
 Merger reserve                                                                                                             14,345           14,345                     14,345
 Own share reserve                                                                                                          (348)            (348)                      (348)
 Retained earnings                                                                                                          14,679           12,671                     13,999
 Other reserves                                                                                                             1,594            196                        905
                                                                                                                            34,719           31,313                     33,350
 NON-CONTROLLING INTEREST                                                                                                   20               40                         6
 TOTAL EQUITY                                                                                                               34,739           31,353                     33,356

 LIABILITIES
 NON-CURRENT LIABILITIES
 Borrowings                                                                                                                 8,281            10,156                     9,219
 Lease liabilities                                                                                                          2,002            2,335                      2,275
 Provisions                                                                                                                 212              197                        212
 Deferred tax                                                                                                               5,153            5,986                      5,570
                                                                                                                            15,648           18,674                     17,276
 CURRENT LIABILITIES
 Borrowings                                                                                                                 1,875            2,344                      1,875
 Trade and other payables                                                                                                   5,979            5,934                      6,280
 Lease liabilities                                                                                                          502              473                        465
 Tax payable                                                                                                                1,202            875                        1,113
                                                                                                                            9,558            9,626                      9,733
 Liabilities directly associated with assets in a disposal group classified as                                              -                192                        -
 held for sale
                                                                                                                            9,558            9,818                      9,733
 TOTAL LIABILITIES                                                                                                          25,206           28,492                     27,009
 TOTAL EQUITY AND LIABILITIES                                                                                               59,945           59,845                     60,365

 

 

 

 

* See note 3 for details regarding the restatement as a result of reflecting
the accounting treatment used in the audited financial statements for the year
ended 31 December 2021.

 

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

                               Called up share capital                     Retained earnings  Share premium  Own share reserve  Merger reserve  Other reserves     Total    Non-controlling interest  Total

                                                                                                                                                                                                      equity
                                                             £'000         £'000              £'000          £'000              £'000           £'000           £'000       £'000                     £'000
 Balance at 1 January 2021 (audited)                         258           12,690             4,040          -                  2,796           779             20,563      9                         20,572
 Profit and total comprehensive income                       -             954                -              -                  -               -               954         31                        985
 Share-based payments charge                                 -             -                  -              -                  -               301             301         -                         301
 Shares issued - acquisition consideration                   55            -                  -              -                  11,549          -               11,604      -                         11,604
 Share issued - share option exercises                       7             731                89             -                  -               (731)           96          -                         96
 Net settlement of PAYE on options by EBT                    -             -                  -              -                  -               (72)            (72)        -                         (72)
 Purchase of shares by Employee Benefit Trust                -             -                  -              (348)              -               -               (348)       -                         (348)
 Release of deferred tax on share options                    -             -                  -              -                  -               (81)            (81)        -                         (81)
 Dividends                                                   -             (1,704)            -              -                  -               -               (1,704)     -                         (1,704)
 Total transactions with owners                              62            (973)              89             (348)              11,549          (583)           9,796       -                         9,796
 Balance at 30 June 2021 (unaudited)                         320           12,671             4,129          (348)              14,345          196             31,313      40                        31,353
 Profit and total comprehensive income                       -             2,515              -              -                  -               -               2,515       9                         2,524
 Disposal of subsidiary                                      -             -                  -              -                  -               -               -           (43)                      (43)
 Dividends                                                   -             (1,218)            -              -                  -               -               (1,218)     -                         (1,218)
 Share issued - share option exercises                       -             31                 -              -                  -               (31)            -           -                         -
 Net settlement of PAYE on options by EBT                    -             -                  -              -                  -               72              72          -                         72
 Share-based payments charge                                 -             -                  -              -                  -               668             668         -                         668
 Total transactions with owners                              -             (1,187)            -              -                  -               709             (478)       -                         (521)
 Balance at 31 December 2021 (audited)                       320           13,999             4,129          (348)              14,345          905             33,350      6                         33,356
 Profit and total comprehensive income                       -             3,169              -              -                  -               -               3,169       14                        3,183
 Share-based payments charge                                 -             -                  -              -                  -               644             644         -                         644
 Deferred tax on share options                               -             -                  -              -                  -               45              45          -                         45
 Dividends                                                   -             (2,489)            -              -                  -               -               (2,489)     -                         (2,489)
 Total transactions with owners                              -             (2,489)            -              -                  -               689             (1,800)     -                         (1,800)
 Balance at 30 June 2022 (unaudited)                         320           14,679             4,129          (348)              14,345          1,594           34,719      20                        34,739

 

 

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

                                                                                                             Unaudited                       Restated                   Audited

                                                                                                                                             Unaudited
                                                                                                             6 Months Ended                  6 Months Ended             12 Months Ended
                                                                                                             30.06.22                                  30.06.21                   31
                                                                                                                                                                                  .1
                                                                                                                                                                                  2.
                                                                                                                                                                                  21
                                                                                                             £'000                           £'000                      £'000
 Cash flows from operating activities
 Profit before income tax                                                                                    3,791                           3,479                      6,423
 Depreciation and amortisation charges                                                                       1,095                           555                        1,878
 Revaluation of investments in shares                                                                        -                               32                         (83)
 Share-based payments charge                                                                                 644                             301                        970
 Loss on discontinued operations, net of tax                                                                 -                               140                        152
 Finance costs                                                                                               220                             119                        320
 Finance income                                                                                              (15)                            (2)                        (4)

 Operating cash flow before changes in working capital  5,735                                                                                4,624                      9,656
 (Increase) / Decrease in trade and other receivables                                                        (1,071)                         (445)                      247
 Increase / (Decrease) in trade and other payables                                                           (281)                           921                        953
 Cash generated from operations                                                                              4,383                           5,100                      10,856

 Interest paid                                                                                               (162)                           (42)                       (232)
 Tax paid                                                                                                    (908)                                     (625)                      (1,679)
 Net cash generated from operations                                                                          3,313                                     4,433                      8,945

 Cash flows from investing activities
 Purchase of subsidiaries net of cash acquired - Hunters                                                     -                                         (13,041)                   (13,041)
 Purchase of subsidiaries net of cash acquired - Mortgage Genie                                                                -                       -                          (103)
 Cash in disposal group held for sale                                                                        -                                         (327)                      -
 Disposal of subsidiary undertakings net of cash disposed of                                                 -                                         -                          (323)
 Purchase of intangible assets                                                                               (356)                                     (13)                       (116)
 Purchase of tangible assets                                                                                 (58)                                      -                          (87)
 Payment of assisted acquisitions support                                                                    (87)                                      (31)                       (57)
 Interest received                                                                                           15                                        2                          4
 Net cash used in investing activities                                                                       (486)                                     (13,410)                   (13,723)

 Cash flows from financing activities
 Issue of ordinary shares                                                                                    -                                         96                         96
 Equity dividends paid (note 9)                                                                              (2,489)                                   (1,704)                    (2,922)
 Purchase of shares by Employee Benefit Trust                                                                -                                         (348)                      (348)
 Bank loan drawn                                                                                             -                                         12,500                     12,500
 Bank loan repaid                                                                                            (938)                                     (3,013)                    (4,419)
 Principal paid on lease liabilities                                                                         (177)                                     (187)                      (399)
 Interest paid on lease liabilities                                                                          (58)                                      (31)                       (88)
 Net cash (used in)/ from financing activities                                                               (3,662)                                   7,313                      4,420

 Decrease in cash and cash equivalents                                                                       (835)                                     (1,664)                    (358)
 Cash and cash equivalents at the beginning of the period                              8,413                                                           8,771                      8,771
 Cash and cash equivalents at end of the period                                                              7,578                                     7,107                      8,413

 

                     THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

 

FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

 

1.          GENERAL INFORMATION

The principal activity of The Property Franchise Group plc and its
subsidiaries continues to be that of a UK residential property franchise
business. The company is a public limited company incorporated and domiciled
in the UK. The address of its head office and registered office is 2 St
Stephen's Court, St Stephen's Road, Bournemouth, Dorset, UK.

2.         BASIS OF PREPARATION

The consolidated interim financial information for the six months ended 30
June 2022 was approved by the Board and authorised for issue on 13 September
2022. The results for 30 June 2022 and 30 June 2021 are unaudited. The
disclosed figures are not statutory accounts in terms of Section 435 of the
Companies Act 2006. Statutory accounts for the year ended 31 December 2021 on
which the auditors gave an audit report which was unqualified and did not
contain a statement under Section 498(2) or (3) of the Companies Act 2006,
have been filed with the Registrar of Companies. The annual financial
statements of the Group are prepared in accordance with UK adopted
international accounting standards and, as regards the Parent Company
financial statements, as applied in accordance with the provisions of the
Companies Act 2006.

This interim report has been prepared on a basis consistent with the
accounting policies expected to be applied for the year ending 31 December
2022, and uses the same accounting policies and methods of computation applied
for the year ended 31 December 2021.

Going concern

When assessing the foreseeable future the directors have looked at a period of
12 months from the date of approval of the interim financial information. The
directors have a reasonable expectation that the Group has adequate resources
to continue to trade for the foreseeable future and, therefore, consider it
appropriate to prepare the Group's interim financial information on a going
concern basis.

Significant accounting policies

The Group's interim financial information includes those of the parent company
and its subsidiaries, drawn up to 30 June 2022. Subsidiaries are all entities
over which the Group has control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are deconsolidated from the date that
control ceases.

 

The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
values of the assets transferred, the liabilities incurred to the former
owners of the acquiree and the equity interests issued by the Group.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Acquisition-related costs are expensed as incurred.

Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated.
When necessary amounts reported by subsidiaries have been adjusted to conform
with the Group's accounting policies.

3.         RESTATEMENT OF PRIOR PERIOD

The unaudited figures for the 6 months ended 30 June 2021 presented in these
financial statements have been amended to reflect the accounting treatment in
the audited financial statements for the year ended 31 December 2021, so
therefore there are some differences to what was presented last year. The
balances affected relate to the Hunters acquisition accounting, share option
exercise and deferred tax rate change. The overall impact on the Statement of
Comprehensive income is a reduction in profit of £1.2m for the 6 months ended
30 June 2021 compared to the unaudited financial statements presented last
year. The main elements were £1.5m deferred tax charge (note 6) less £0.3m
purchase of shares by TPFG employee benefit trust moved out of costs to Own
share reserve.

 

                     THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

 

                   FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

4.         SEGMENTAL REPORTING

The directors consider there to be two operating segments being Property
Franchising and Other.

 

For the six months ended 30 June 2022:

                                     Property

                                     Franchising         Other     Total
 Continuing                          £'000               £'000     £'000
 Revenue                                      12,211     878       13,809
 Segment profit before tax                    3,575      216       3,791

 

 

                                     Property

                                     Franchising         Other     Total
 Discontinued                        £'000               £'000     £'000
 Revenue                                      -          -         -
 Segment profit before tax                    -          -         -

 

For the six months ended 30 June 2021:

                                     Property

                                     Franchising         Other     Total
 Continuing                          £'000               £'000     £'000
 Revenue                                      11,122     -         11,122
 Segment profit before tax                    3,479      -         3,479

 

                                     Property

                                     Franchising         Other     Total
 Discontinued                        £'000               £'000     £'000
 Revenue                                      -          242       242
 Segment profit before tax                    -          155       155

 

For the year ended 31 December 2021:

                                     Property

                                     Franchising         Other     Total
 Continuing                          £'000               £'000     £'000
 Revenue                                      23,595     447       24,042
 Segment profit before tax                    6,363      60        6,423

 

                                     Property

                                     Franchising         Other     Total
 Discontinued                        £'000               £'000     £'000
 Revenue                                      -          267       267
 Segment profit before tax                    -          153       153

 

 

The Other segment related to Financial Services in all periods. There was no
inter-segment revenue in any period. See note 7 for details of discontinued
operations

                     THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

 

                   FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

 

5.         REVENUE

                   Unaudited                         Unaudited         Audited
                                 6 Months Ended      6 Months Ended    12 Months Ended
                                 30.06.22            30.06.21          31.12.21
                                 £                   £                 £

     Management service fee      7,496               7,145             14,706
     Owned offices revenue       2,548               1,950             4,708
     Franchise sales             147                 291               589
     Other                       2,898               1,736             4,039
                                 13,089              11,122            24,042

 

All revenue is earned in the UK and no customer represents greater than 10 per
cent of total revenue in the periods reported.

6.         TAXATION

The underlying tax charge is based on the expected effective tax rate for the
full year to December 2022. The majority of the tax arises from applying this
effective tax rate to the profit on ordinary activities. The periods ended 30
June 2021 and 31 December 2021 include a one-off deferred tax charge of £1.5m
in relation to the rate change from 19% to 25% which was substantially enacted
in May 2021.

7.         HELD FOR SALE

On 22 July 2021 the sale of Aux Group Limited and Auxilium Partnership Limited
to Mark Graves completed. The terms of the sale were agreed prior to the
period end and at 30 June 2021 there was a strong expectation that the
completion was imminent. As such the assets and liabilities were disclosed as
'held for sale' at 30 June 2021 in the financial statements and an impairment
loss had been recognised through the profit and loss account being the
difference between the proceeds received on sale and the assets to be disposed
of which were estimated at £0.3m. The profit for the year of Auxilium was
shown as discontinued operations in the profit and loss account, £0.08m was
attributable to the owners of the parent, therefore the net loss in the profit
and loss account in relation to the period for Auxilium is £0.2m.

8.         EARNINGS PER SHARE

Earnings per share is calculated by dividing the profit for the financial
period by the weighted average number of shares during the period.

                                                           Unaudited           Restated          Audited

                                                                               Unaudited
                                                           6 Months Ended      6 Months Ended    12 Months Ended
                                                           30.06.22            30.06.21          31.12.21
                                                           £'000               £'000             £'000

 Profit for the period attributable to owners of parent    3,169               954               3,469
 Amortisation on acquired intangibles                      721                 478               1,214
 Share-based payments charge                               644                 301               970
 Exceptional acquisition costs                             -                   853               853
 Deferred tax rate change from 19% to 25%                  -                   1,540             1,540
 Discontinued operations - loss on disposal                -                   298               293
 Gain on revaluation of listed investments                 -                   -                 (83)
 Adjusted profit for the period                            4,534               4,424             8,256

 

 

 

                     THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

 

FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

 

8.         EARNINGS PER SHARE (CONTINUED)

                                                                                    Unaudited                       Audited

                                                                                                  Unaudited
                                                                                    6 Months      6 Months Ended    12 Months Ended

                                                                                    Ended
                                                                                    30.06.22      30.06.21          31.12.21
                                                                                    32,041,966    29,178,704        30,622,102

 Weighted average number of shares

 Dilutive effect of share options on ordinary shares                                99,667        99,590            99,590
                                                                                    32,141,633    29,278,294

                                                                                                                    30,721,692

                                                                                    Unaudited     Restated          Audited

                                                                                                  Unaudited
                                                                                    6 Months      6 Months Ended    12 Months Ended

                                                                                    Ended
                                                                                    30.06.22      30.06.21          31.12.21

 Basic earnings per share                                                           9.9p          3.3p              11.3p
 Diluted earnings per share                                                         9.9p          3.3p              11.3p
                                                                                    14.1p         15.3p             27.0p

 Adjusted basic earnings per share
 Adjusted diluted earnings per share                                                14.1p         15.1p             26.9p

 

 

9.      DIVIDENDS

                                            Unaudited      Unaudited            Audited
                                            As at          As at                As at
                                            30.06.22       30.06.21   31.12.21
                                            £'000          £'000                £'000
 Final dividend paid                        2,489          1,704                1,704
 Dividend per share paid                    7.8p           6.6p                 6.6p

 Interim dividend paid                      -              -                    1,218
 Dividend per share paid                    -              -                    3.8p

 Total Dividends paid                       2,489          1,704                2,922

 

 

An interim dividend for 2022 of 4.2p per share has been declared and will be
paid on 7 October 2022 to all shareholders on the register on 23 September
2022. Our shares will be marked ex-dividend on 22 September 2022. The total
amount payable is £1.346m.

 

 

 

 

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